We need to talk about the national minimum wage

In an unequal society like SA, we need a minimum wage to raise earnings for those at the base, says Imraan Buccus.

Durban - Inequality in South Africa is growing. The private sub-state is populated by the wealthy, who have access to private services, while the poor struggle to survive. And the poor are becoming increasingly angry with the wealthy.

English cultural theorist Terry Eagleton reminds us: “It is not hard to imagine affluent communities of the future protected by watch towers, searchlights and machine guns, while the poor scavenge for food in the wastelands beyond.” Is this not, in many ways, already the situation in South Africa?

The wealth gaps are staggering.

So the debate that we all need to take seriously is the debate around the national minimum wage.

And a new report titled “A National Minimum Wage for South Africa” has placed this issue in the national conversation once again. Researchers like Gilad Isaacs have suggested a minimum wage of R4 500 to R5 500 a month.

The report predicts that a national minimum wage of R3 500 to R4 600 a month would move GDP growth to about 2.9% by encouraging more spending.

No doubt the captains of industry in SA will argue otherwise. It has become common practice for them to argue that many will lose their jobs, while the youth will find it even more difficult to gain entry to formal employment.

They also argue that work hours may decrease, and benefits like medical aid and pensions may be reduced.

Those who favour labour market flexibility argue that our workers are not able to compete with workers in China in terms of wages, or workers in Germany in terms of skills and productivity, and that this means the only viable way to create employment is to avoid the implementation of a minimum wage, and allow bosses to hire and fire at will.

For the proponents of this argument, the solution to the unemployment crisis is for the state to support business, not labour, in the hope that this will produce economic growth and result in rapidly increasing employment.

But international research and experience shows differently. It is often argued that the introduction of a minimum wage in Brazil has been central to the ongoing reduction of inequality there and that increasing the amount of cash in poorer communities offers a vital boost to economic activities in those communities.

Trade unionists have often pointed out that unemployment actually fell in Brazil after the introduction of a minimum wage.

In the developed world, we know that the impact of minimum wages on employment is unequivocal. Researchers have shown that minimum wage increases have statistically insignificant disemployment effects.

And in the developing world, minimum wages have insignificant employment effects. In an unequal society like South Africa, we need a minimum wage to raise earnings for those at the base, more than for middle and higher earners. And minimum wage does exactly that. There is overwhelming evidence for the positive impact of minimum wage in Latin America, where many countries have similar inequality to SA.

No doubt minimum wage reduces inequality. Russia and Columbia add to the body of evidence, while we know from Mexico’s experience that when minimum wages decline, inequality increases - this occurred between 1979 and 1989. More recent work has also shown, in a study of 10 countries, that average wages in the informal sector increased as a result of minimum wage.

After apartheid, our economy was largely organised around the interests of capital, on the understanding that profits would trickle down to all. We all know that that didn’t happen.

In recent times there has been an increasing organisation of our economy around patronage and clientelism. Parastatals in particular have been excessively abused. The time has come to organise our economy around the interests of society, especially those who earn the least.

This will also require taking on the political class that has a direct interest in sustaining a culture of patronage.

But knowing what needs to be done is just part of the puzzle. The best ideas in the world mean nothing without the political instrument to realise them in practice.

There are no guarantees about the way ahead. But this is a time of real possibility.

Our commitment to those who earn the least in our society should not be impacted upon by the bullies in the corporate sector - those who care only about the maximisation of profits.

* Buccus is a senior research associate at ASRI, research fellow in the School of Social Sciences at UKZN and the academic director of a university study abroad programme on political transformation.

** The views expressed here are not necessarily those of Independent Media.